A teenage terror suspect and a 15-year-old British boy discussed packing a kangaroo with explosives then setting it loose on Australian police officers, a court has heard.

Melbourne Magistrates Court ordered Sevdet Ramadan Besim, 19, to stand trial in the Victoria state supreme court accused of planning an Islamic State (IS)-inspired terrorist attack at an Anzac Day ceremony last year that included targeting police officers.

Besim pleaded not guilty to four charges relating to a plot to attack commemorative services in Melbourne or the neighbouring city of Dandenong to mark Anzac Day, the annual April 25 commemoration of the 1915 Gallipoli landings in Turkey.

Besim, who faces a potential life sentence if convicted, and four alleged conspirators were arrested in Melbourne a week before Anzac Day.

In court documents, prosecutors said Besim and the British-based youth discussed in online conversations that a kangaroo could be packed with explosives, painted with "the IS symbol" and set loose on police.

Besim was also accused of planning to use a car to run over, then behead a police officer.

He allegedly said in online communications he was "ready to fight these dogs on there (sic) doorstep".

"I'd love to take out some cops," Besim is said to have written. "I was gonna meet with them then take some heads."

Police allege Besim was motivated by an extremist ideology and had expressed support for terrorist organisations, particularly the IS movement.

In the UK, the 15 year old, from Blackburn, was sentenced at Manchester Crown Court for his part in the Anzac Day plot.

Handing down a life sentence with no chance of parole for five years, Judge John Saunders said the teenager would be released only when he was no longer a danger to the public.

The Gallipoli campaign was the first major military action fought by the Australian and New Zealand Army Corps during the First World War and hundreds of thousands attend commemoration services around Australia.